Walking away also makes sense for banks if they can get away with it and the costs outweigh the benefits of going through foreclosure proceedings. Many banks may get away with this by playing the same games as homeowners facing foreclosure - asking for proof of who the noteholder actually is! Securitization has made this process less than straightforward.

The losers in this situation are not only people losing their homes (who may actually be better off if they can find a cheaper place to rent), but neighborhoods having to put up with empty homes and governments looking for tax revenue. Housing doesn't need more factors going against it right now, but these forces keep piling up.

A bottom in real estate in 2011-2012 is the optimistic scenario, by the way, and ignores the obvious psychological factors that will keep real estate low for 5-15 years after the bottom hits. The commercial real estate bust is now in full force and will decimate holders of this asset as well. Unemployment is soaring and has not yet even come close to stabilizing, retail is in big trouble, and banks are insolvent. Many banks don't know if they can make it to Saturday without a not-so-friendly visit from the FDIC (which is also insolvent, but our government will bail out the FDIC repeatedly during this crisis). Remain calm, all is well...